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IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, MUMBAI
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BEFORE S/SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND
SHRI SANDEEP GOSAIN, JUDICIAL MEMBER
./I.T.A. No.7111/Mum/2012
( / Assessment Year :2008-09)
Shri Dinanath Badrinath / Income Tax Officer
Chhabra, Vs. 19(3)(1),
1, Sanjukta Building, Piramal Chambers,
Old Patkar Block, Mumbai
S V Road, Bandra (W),
Mumbai-50
./ PAN :
( /Appellant) .. ( / Respondent)
./ ./ PAN:ADXPC6748H
/ Appellant by : Shri Dharmesh Shah
/ Respondent by : Shri Uday B Jakke
/ Date of Hearing
: 7.12.2015
/Date of Pronouncement : 7.12.2015
ORDER
PER B.R.BASKARAN,AM:
The appeal filed by the assessee is directed against the order dated
05-09-2012 passed by Ld CIT(A)-30, Mumbai and it relates to the
assessment year 2008-09. The assessee is aggrieved by the decision of Ld
CIT(A) in respect of the following issues:-
(a) Reduction of indexed cost of acquisition of by Rs.37,117/-
(b) Rejection of claim for deduction u/s 54F of the Act.
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(c) Interest charged u/s 234B and penalty initiated u/s 271(1)(c)
of the Act.
The ground relating to interest charged u/s 234B is procedural in nature
and the validity of initiation of penalty proceedings is too premature to
contest. Hence, we reject the grounds relating to the said issues.
2. The facts relating to the issues are stated in brief. During the year
under consideration, the assessee sold two residential flats and one shop
located at Pune. The assessee also purchased two adjacent flats in a
residential apartment on 22.2.2008 and 15.3.2008. The assessee claimed
deduction u/s 54 and also u/s 54F of the new residential flats against the
long term capital gains arising on sale of old residential flats and one shop.
According to the Ld A.R, the assessee had sold the residential flat on
31.7.2007 and thereafter sold the shop on 01-02-2008. However, the AO
disallowed the claim for deduction u/s 54F against the long term capital
gain arising on sale of shop on the following reasons:-
(a) On the date of sale, the assessee owned two residential houses
(the old houses which were sold by the assessee).
(b) The assessee has purchased two flats
thereby violating the conditions prescribed u/s 54F of the Act. The AO,
however, allowed the deduction u/s 54 of the Act to the extent of capital
gain declared on sale of two residential houses. In respect of the shop,
the AO noticed that the assessee has paid the stamp duty and registration
charges only on 23.2.2007, even though the shop had been purchased on
08.3.2002. Accordingly, the AO allowed the indexation benefit to the
stamp duty and registration charges from FY 2006-07 onwards.
3. In the appellate proceedings, the assessee contended before the Ld
CIT(A) that the adjacent flats purchased by him have been joined together
and hence both the flats should be treated as one residential unit. The Ld
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CIT(A) called for a remand report from the AO. The assessing officer
called for necessary information from the Society office, which confirmed
that both the flats were occupied and used by the family members of the
assessee as a single unit. Accordingly, the AO reported that the Ld CIT(A)
may take a decision. However, the AO gave that report with a rider that
the assessee has purchased the flats by way of separate agreements.
4. The Ld CIT(A) discussed the facts relating to the deduction claimed
u/s 54F of the Act and held that the assessee has not satisfied both the
conditions prescribed in proviso to sec.54F(1) of the Act. The conditions
prescribed in the proviso are
(i) the assessee should not own more than one residential house,
other than the new asset, on the date of transfer of original asset.
(ii) the assessee should not purchase any residential house, other
than the new asset, within a period of one year after the date of
transfer of the original asset.
The Ld CIT(A) also confirmed the indexation benefit computed by the
assessing officer in respect of stamp duty and registration charges paid on
purchase of shop.
5. We notice that there appears to be a mistake in appreciation of facts
on the part of the tax authorities. According to the Ld A.R, the assessee
had sold the residential flat on 31.7.2007 and thereafter sold the shop on
01-02-2008, while the tax authorities have presumed the residential units
have been sold after the sale of shop. Since the factual aspects relating to
this contradictory stand require verification, we set aside this matter to the
file of the assessing officer for carrying out proper examination of the
facts.
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6. With regard to the view taken by the tax authorities that the
assessee has violated the second condition prescribed u/s 54F of the Act
by purchasing two residential units, the Ld A.R, by placing reliance on the
decision rendered by the Hon'ble Bombay High Court in the case of CIT Vs.
Devdas Naik (2014)(366 ITR 12), submitted that the adjacent flats have
been joined together and used by the assessee as a single unit and hence
there is no violation of the conditions as prescribed by the tax authorities.
We have noticed that the assessing officer has already submitted a
remand report by obtaining details from the society office, where in it was
certified that both the flats are used by the assessee as a single residential
unit. Since this fact has been accepted by the tax authorities, merely
because, the two flats have been purchased by way of two separate
agreements, in our view, will not make any difference. Accordingly, we
are of the view that both the flats purchased by the assessee and joined
and also used together as a single unit should be considered as a single
residential house for the purpose of sec. 54F of the Act.
7. With regard to the indexation benefit computed on the stamp duty
and registration charges paid in FY 2006-07, we do not find it necessary to
interfere with the decision of the Ld CIT(A) on this issue, as the Ld A.R did
not forcefully contend the same.
8. The Ld A.R raised one more contention with regard to the quantum
of deduction allowable u/s 54F of the Act. The Ld A.R submitted that the
assessing officer has already expressed the view in the assessment order
that the deduction allowed u/s 54 of the Act shall be reduced from the cost
of the new asset and accordingly the deduction u/s 54F shall be computed,
if the assessee is held to be eligible for deduction under that section. The
Ld A.R submitted that there is no express provision in the Act that the
deduction u/s 54 shall be allowed before allowing deduction u/s 54F of the
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Act. Further, the provisions of sec. 54F talks about the cost of new asset
and nowhere it prescribe that the deduction allowed u/s 54 shall be
deducted from the cost of asset.
9. After hearing Ld D.R on this issue, we are of the view that there is
merit in the contentions of the Ld A.R. There is nothing in the provisions
of the Act that the cost of new asset shall be arrived at by deducting the
deduction allowed u/s 54 of the Act for the purpose of computing
deduction u/s 54F of the Act. There is also no provision in the Act which
list out the priority of the deductions. Accordingly, we direct the AO to
compute the deduction u/s 54F of the Act by taking the cost of new asset
without deducting the deduction allowed u/s 54 of the Act, subject to the
decision taken with regard to the verification of the dates of sale of
residential house and shop.
10. With the above said observations, we set aside the matter relating
to the deduction u/s 54F of the Act to the file of the assessing officer.
11. In the result, the appeal filed by the assessee is treated as partly
allowed for statistical purposes.
Order pronounced in the open court 7th ,Dec,2015.
Sd sd
( /SANDEEP GOSAIN) ( ../ B.R.BASKARAN)
/Judicial Member /Accountant Member
Mumbai; Dated.. 7th, Dec,2015
.../ SRL, Sr. PS
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/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)- concerned
4. / CIT concerned
5. , , /
DR, ITAT, Mumbai concerned
6. / Guard file.
/ BY ORDER,
True copy
(Asstt. Registrar)
, /ITAT, Mumbai